Mr Haughey’s task

Press, 23 February 1987, Page 20

Mr Haughey’s task

Mr Charles Haughey did not get an over-all majority in Ireland’s election so he, like Mr Garret Fitzgerald before him, will have to manage with a coalition Government. Considering the state of Ireland’s economy, the country needed someone with a clear appreciation of what has to be done to right the economy, and someone with a clear mandate to put the plans into effect. Mr Haughey is going to rely on the votes of other members of Parliament to stay in power. In any case, he is not a leader with a strong sense of economic purpose, unless that purpose is to spend more. Mr Haughey may not have much to spend. Ireland’s unemployment rate is 19 per cent; its interest rate for prime borrowers is 13.5 per cent (modest by New Zealand standards, but hair-raising for much of the rest of the world); its exports are declining and its currency is over-valued. Ireland is also heavily in debt internationally and has spent much of what it has borrowed on domestic programmes such as social welfare. Given an unemployment rate like Ireland’s the social welfare spending is doubtless sorely needed. The tax rate is very high. A single person earning an average wage pays about 65.5 per cent on tax and insurance. As if such a high rate of personal tax were not enough, there is also a value-added tax

amounting to 25 per cent on many transactions.

Fianna Fail, which Mr Haughey leads, is a nationalist and rural party Mr Haughey will probably look to Independents for support. They may not prove to be a brake on spending. What Mr Haughey faces, however, is the fact that none of the countries which lent to Ireland are any longer willing to lend more. The question that will arise is how Ireland is going to manage its external debt, and how it will maintain services at home. One possibility is that the problem will be passed to the International Monetary Fund, which will impose its own stringent conditions. This would be highly embarrassing to a lot of Irish officials and bankers, and perhaps to Mr Haughey himself. The I.M.F. may, however, be prepared to push Ireland into doing what successive Irish Prime Ministers have not been prepared to do. <' Mr Haughey has survived a number of scandals and still has enough popularity because of his capacity to judge the right political gesture and words. Ireland seems set to become even poorer before it stands a chance of becoming richer. Mr Haughey will need all the popular touches of which he is capable to make the Irish accept austerity in the next few years.